Hi,
contract staffing companies provide manpower to principle employer. While raising bill on principle employer, I understand the bill includes, the take home salary of the manpower provided, PF, ESI, LWF etc...
But it is silent abount gratuity amount.
How much percentage of salalry(basic/DA....) should be charged by Contract staffing company while billing principle employer?
From India, Madras
2contract staffing companies provide manpower to principle employer. While raising bill on principle employer, I understand the bill includes, the take home salary of the manpower provided, PF, ESI, LWF etc...
But it is silent abount gratuity amount.
How much percentage of salalry(basic/DA....) should be charged by Contract staffing company while billing principle employer?
From India, Madras
1. If the contractor is not charging you for Gratuity then you should not be worried as it is not the responsibility of the Principal Employer to ensure payment of Gratuity.
2. Any how the normal percentage of Gratuity charged is in the range of 4.7% to 4.8% of Basic + DA + VDA.
Hope this helps.
Regards
Preetam Deshpande
From India, Mumbai
2. Any how the normal percentage of Gratuity charged is in the range of 4.7% to 4.8% of Basic + DA + VDA.
Hope this helps.
Regards
Preetam Deshpande
From India, Mumbai
Hi Preetam,
Thanks for the prompt reply.
1) Somewhere I read, the onus of Statutory compliance falls on Principal employer also. Please calrify, whether it is correct.
2) 4.81% on Basic and DA is perfectly correct. But, with this formula there will be a shortfall at the end of the fifth year, as the Basic and DA will be different(higher) at the end of the fifth year.
My query is that how much amount the labour contractor can charge the Principal employer towards gratunity provisioning for the manpower supplied by the contractor?
From India, Madras
Thanks for the prompt reply.
1) Somewhere I read, the onus of Statutory compliance falls on Principal employer also. Please calrify, whether it is correct.
2) 4.81% on Basic and DA is perfectly correct. But, with this formula there will be a shortfall at the end of the fifth year, as the Basic and DA will be different(higher) at the end of the fifth year.
My query is that how much amount the labour contractor can charge the Principal employer towards gratunity provisioning for the manpower supplied by the contractor?
From India, Madras
Dear Experts,
I have one more query here.
Let me assume (may be fact in most of the cases) Contractor is charging 4.81% (basic+da+...as may be applicable) and Principal Employer is also paying the same to the Contractor.
For the gratuity received from P.E. by the Contractor for his employees, in the event if Contractor Employee/s resign within the period of 5 (five) years of service, will the Contractor reimburse "Gratuity amount received from P.E." to Principal Employer (P.E.)?
Hence there won't be any proof of payment of gratuity by the contractor to his contracted labourers, is it binding of the Principal Employer still to encourage pay the Gratuity amount on monthly basis?
I look forward experts views and advice in this regard.
This enlighten many HR professionals on this specific query.
Regards,
Sundararaman
From India, Madras
I have one more query here.
Let me assume (may be fact in most of the cases) Contractor is charging 4.81% (basic+da+...as may be applicable) and Principal Employer is also paying the same to the Contractor.
For the gratuity received from P.E. by the Contractor for his employees, in the event if Contractor Employee/s resign within the period of 5 (five) years of service, will the Contractor reimburse "Gratuity amount received from P.E." to Principal Employer (P.E.)?
Hence there won't be any proof of payment of gratuity by the contractor to his contracted labourers, is it binding of the Principal Employer still to encourage pay the Gratuity amount on monthly basis?
I look forward experts views and advice in this regard.
This enlighten many HR professionals on this specific query.
Regards,
Sundararaman
From India, Madras
Dear Sundaraman
As a pricipal employer while we are hiring contractor it is negotion between both of us regarding commission,bonus,uniform allowances etc.However legal dues like ESI and PF have the percentage.
i have gone through many contracts and most of the pricipal employer does not pay gratuity to contractor.
Gratuity becomes applicable after 5 years of service.Karnatka High court has given a decision in case of gratuity and bvonus also where honable court has mentioned that priniciple employer is not responsible or liable to make these payments if contractor does not make these payment to his employees.
From India, Delhi
As a pricipal employer while we are hiring contractor it is negotion between both of us regarding commission,bonus,uniform allowances etc.However legal dues like ESI and PF have the percentage.
i have gone through many contracts and most of the pricipal employer does not pay gratuity to contractor.
Gratuity becomes applicable after 5 years of service.Karnatka High court has given a decision in case of gratuity and bvonus also where honable court has mentioned that priniciple employer is not responsible or liable to make these payments if contractor does not make these payment to his employees.
From India, Delhi
Hi,
My understanding is that both Principal employer and Contractor are responsible for payment of Gratuity under Gratuity Act 1972.
In such a scenario, if the contractor is not billing gratuity amount from the Principal employer, how will he then make gratuity payments to the employees resigning/retiring after 5 years of continuous service? Therefore, the contractor has to either bill a percentage every month to the Principal employer or the agreement should have a clause to the effect that the Principal employer will enusre the payment of gratuity if any contract staff resigens/retires after continuous service of 5 years.
But here also there is a small hitch. The contract employee would have worked for more than 5 years with the same contractor, but under different Principal employers. In such case it is better to bill the Principal employer every month. Could any one throw some light on this?
From India, Madras
My understanding is that both Principal employer and Contractor are responsible for payment of Gratuity under Gratuity Act 1972.
In such a scenario, if the contractor is not billing gratuity amount from the Principal employer, how will he then make gratuity payments to the employees resigning/retiring after 5 years of continuous service? Therefore, the contractor has to either bill a percentage every month to the Principal employer or the agreement should have a clause to the effect that the Principal employer will enusre the payment of gratuity if any contract staff resigens/retires after continuous service of 5 years.
But here also there is a small hitch. The contract employee would have worked for more than 5 years with the same contractor, but under different Principal employers. In such case it is better to bill the Principal employer every month. Could any one throw some light on this?
From India, Madras
Hi, in reference to the discussion about Gratuity. I would like to take this opportunity to ask, how you calculate the 1/3 gratuity if the employee has served the company for less than 3 yrs. And, 2/3 gratuity how it is calculated if the employee has served the company for less than 5 yrs. Yes, i know that an employee who have served 5 yrs or more in the company will get full calculation of his gratuity. Please share to me your expertise in this line of profession. Thank you very much. Eileen
From United Arab Emirates, Dubai
From United Arab Emirates, Dubai
By the way, is the formula for calculation of gratuity standard in any countries? like in UAE? please confirm. Cheers! Eileen
From United Arab Emirates, Dubai
From United Arab Emirates, Dubai
Hi,
In the beginning of employment, the Management cannot predict whether the employee will be serving 5 years or not. But, keeping the fact that the employee will serve 5 years, Gratuity act 1972 stipulates that provision of gratuity amount has to be made every month/year from the day one of the employee's date of joining.
Calculation is as follows:
As per Graturity policy, employee is entitled for half a month salary(basic +DA) for every completed year of service.
Assume the basic + DA is 100
month is considered having 26 days and not 30 days
Therefore for each year the provisionshould be = 100 x 15/26 = 57.69
for every month = 57.69/12 = 4.81% - here 12 represents number of months in a year
I have no idea about gratuity in other countries.
From India, Madras
In the beginning of employment, the Management cannot predict whether the employee will be serving 5 years or not. But, keeping the fact that the employee will serve 5 years, Gratuity act 1972 stipulates that provision of gratuity amount has to be made every month/year from the day one of the employee's date of joining.
Calculation is as follows:
As per Graturity policy, employee is entitled for half a month salary(basic +DA) for every completed year of service.
Assume the basic + DA is 100
month is considered having 26 days and not 30 days
Therefore for each year the provisionshould be = 100 x 15/26 = 57.69
for every month = 57.69/12 = 4.81% - here 12 represents number of months in a year
I have no idea about gratuity in other countries.
From India, Madras
Hi idbi, thanks for your detailed explanation. Assuming that the employee had left the company after 3 yrs from joining, how you calculate his gratuity? i understand it will be pro rated, right? but i am not sure how it goes as i know only if the employee has served 5 yrs or more. Please show me the calculation, assuming the basic salary is 6000 without allowance.
thanks.
From United Arab Emirates, Dubai
thanks.
From United Arab Emirates, Dubai
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Fixed Term Contract Employees to get Gratuity.docx